I piddled with it. It does actuate, just has a lot of play and when it is in the fully closed position the center valve can flop all the way open without moving the arm or rotary parts. I did try manually opening the valves with the motor running to see if the clacking got quieter (Since in the open position it would only be able to wiggle a few mm instead of an inch), didn't affect the sound... so I guess it probably has piston slap AND power valve issues. Eh, I knowingly got this 1k bike instead of a 2k bike figuring it would need some work. Guess its time to do the work now. At least when I freshen it I will know it was done right and it is really 100% fresh.
On a good note, I got the hard to start problem fixed. The air screw was way too lean. I set it to 2 turns out and now it responds crisply and starts 2nd or 3rd kick from cold.